Age related income tax allowance

The end of the year marks the deadline for many tax and other qualification requirements for qualified retirement and savings plans. It is important that plan sponsors review whether any qualified plan action items must be addressed prior to year-end. This LawFlash describes potential year-end notices and plan amendments that may be required for tax-qualified retirement and savings plans. This list is not exhaustive, but it is intended to serve as a reminder of items that plan sponsors should review and consider before the end of the year.Plan AmendmentsThe deadlines to adopt amendments to comply with certain provisions of the Pension Protection Act of 2006 (PPA) relating to benefit restrictions and hybrid plans and the provision of the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) relating to the waiver of required minimum distributions were extended to the last day of the first plan year beginning on or after January 1, 2011. Thus, calendar year plans must adopt these … [Read more...] about Tax-Qualified Retirement Plans: Amendments and Other Year-End Action Items

On February 2, 2015, the White House released its Fiscal Year 2016 Budget, which includes a number of tax code changes targeting retirement savings. If enacted as presented, the proposals would have a significant effect on current retirement-related tax incentives. The stated intention of the suggested changes is to simplify the Internal Revenue Code and use the resulting savings to pay for other reforms of the tax code. Tax Reform for Families and Individuals Provide for Mandatory IRA Auto-Enrollment for Certain Small Businesses and Related Tax CreditsThe proposal would require an employer that has been in business for at least two years and has more than 10 employees to offer an automatic IRA option to its employees if it doesn’t already offer another type of employer-sponsored retirement plan (e.g., 401(k) plan). Employers that already sponsor a qualified retirement plan would not be required to offer the automatic IRA option. However, if any portion … [Read more...] about White House Budget Proposal Includes Many Retirement-Related Provisions

I. IntroductionContinuing care retirement communities (CCRCs) are professionally managed retirement communities, many of which also function as long-term skilled nursing care facilities. CCRCs offer residents lifestyle amenities and coordinated social activities as well as various degrees of medical care and assisted-living services. CCRCs generally provide residents with progressive levels of care, ranging from independent living to assisted living to skilled nursing care. This tiered-care approach permits residents to increase their level of assistive services as needed, based on changes in their mental or physical health. Not all CCRCs are operated in the same manner. For example, skilled nursing services may be offered either onsite or offsite and sometimes are provided through a referral agreement with a third party. The costs associated with residing at a CCRC may vary significantly depending on the continuing care agreement offered by the … [Read more...] about Continuing Care Retirement Communities (CCRCs) Fees – A Primer on the Tax Treatment of Entrance and Monthly Fees

Two years after the Internal Revenue Service (IRS) and U.S. Department of Labor (DOL) jointly issued a high-profile Request for Information regarding how defined contribution plans can better provide lifetime income, the IRS and Department of the Treasury have issued some initial guidance. DOL guidance, expected to further underscore the importance of the issue, is anticipated “in the near future.” On February 2, 2012, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) released proposed regulations and a new Revenue Ruling relating to the purchase of longevity annuities (sometimes referred to as “longevity insurance” or a “deeply deferred annuity”) inside defined contribution retirement plans and individual retirement accounts (IRAs).The new guidance is an initial package of guidance intended to remove regulatory barriers and simplify the offering of lifetime income benefits to retirees. The decline of traditional defined … [Read more...] about Treasury Department and IRS Release Initial Lifetime Income Guidance; Additional Guidance Expected Shortly

In a decision issued February 9, the U.S. Tax Court ruled, in part, that the partners of a law firm established as a limited liability partnership (LLP) under state law were subject to Self-Employment Contributions Act (SECA) tax on their distributive share of LLP income received in respect of their services. In doing so, the court determined that the LLP partners could not avail themselves of the exemption from SECA for nonguaranteed service payments to "limited partners." This ruling illustrates the potential risk for service provider limited partners and limited liability company members of assuming that state law entity and limited liability classifications alone shield them from being subject to SECA tax.Generally, payments to service providers who are not classified as employees for federal payroll tax purposes are not subject to any payroll tax withholding or payment liability on the part of the payor. Instead, Section 1401 imposes SECA tax on "self-employment" income at the … [Read more...] about Tax Court Decision Subjects LLP Service Providers/Equity Partners to Self-Employment Tax

Tax practitioners rarely get to experience the kind of nail-biting adventure that Indiana Jones seems to face on a daily basis. Well, this New Year’s Eve, tax aficionados finally got their chance to don a weathered fedora and champion good over evil. Specifically, as Congress first cast us over the fiscal cliff on December 31, 2012 and then reeled us back on New Year’s Day, it’s fair to say that the enactment of tax legislation has never been more gripping. By 11:00 p.m. on New Year’s Day 2013, the House of Representatives followed the Senate in passing H.R. 8, the “American Taxpayer Relief Act of 2012” (the “Act”). President Obama signed this legislation into law on January 2, 2013. Accordingly, the Act is now law.Succinctly stated, the Act imposes an income tax increase on top-earning U.S. taxpayers, nudges up the estate tax rate to a maximum of 40% (from 35%) and extends a variety of tax incentives that either had already expired or … [Read more...] about Fiscal Cliffhanger: Congress Passes Federal Tax & Health Care Legislation for 2013

Today, the Republicans in the U.S. House of Representatives released their long-anticipated tax reform bill, entitled the “Tax Cuts and Jobs Act”. While there have been multiple statements from the Republican majority in the House that swift action is expected on this bill, nevertheless the text proposed today all but certainly will be extensively revised in the legislative process. Further, the Republicans in the U.S. Senate are expected to introduce their own tax reform bill as early as next week, and that bill is anticipated to diverge from the House bill in many respects and, in order for tax reform to be enacted, the House and Senate will have to pass a single piece of agreed legislation, which the President must in turn sign into law.Notwithstanding the very substantial effort that remains before the Congress to enact tax reform into law, the introduction of legislative text along with the publication of a highly detailed summary of each provision is an important … [Read more...] about The Tax Cuts and Jobs Act

In mid-December, along with a $1.1 trillion spending deal, Congress passed and the President signed the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act), a robust tax extenders package. The Act renews more than 50 tax subsidies – 19 permanently – and is intended to provide support to both individuals and businesses.The Act, which is estimated to cut taxes by more than $650 billion over 10 years, has been lauded not just for its tax credits, but for the sense of stability it offers, as provisions that have expired on a yearly basis have now been extended permanently or at least beyond 2016 (the now-permanent provisions account for $560 billion of the tax cuts). With careful tax planning, individuals and businesses can now better prepare for the year ahead. Business Tax ProvisionsAmong the most notable aspects of the legislation for businesses is the permanent extension and expansion of the R&D Tax Credit and the Section 179 Tax Deduction.The R&D Tax … [Read more...] about New Tax Act Brings Element of Stability

On September 29, President Trump signed into law the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (the “Act”). The Act provides temporary tax relief to the victims Hurricanes Harvey, Irma, and Maria (the “Hurricanes”). The Act also provides victims of the Hurricanes with additional access to their retirement accounts and lessens the tax burdens related to these distributions. Below is a summary of the relief provided by the Act. This relief is in addition to the relief previously provided by the IRS, DOL and PBGC, as discussed in our recent client alert titled “Federal Agencies Provide Benefit Plan Relief to Victims of Hurricanes Harvey and Irma,” released earlier this month. Relief to Participants of Eligible Retirement Plans Qualified Hurricane DistributionsIn addition to the relaxed withdrawal rules under prior IRS guidance, the Act permits individuals directly affected by the Hurricanes to take a “qualified … [Read more...] about Congress Provides Additional Tax Relief for Victims of Hurricanes Harvey, Irma and Maria